Question: Answer the questions below using the data in the following table, which shows a market for a product that has significant social benefits. Price Quantity

Answer the questions below using the data in the following table, which shows a market for a product that has significant social benefits.

Price Quantity Demanded Quantity Supplied

$16 30 70

12 35 55

8 40 40

4 45 25

2 55 20

a. What would the equilibrium price and quantity be?

b. Suppose the price is currently at $2. What problem would exist in the economy? What would you expect to happen to price?

c. Suppose the price is currently $12. What problem exists in the economy? What would you expect to happen to price?

d. Using the midpoint method, calculate the price elasticity of demand if price changes from $12 to $16. Is this elastic or inelastic?

e. A government subsidy is given to the consumers that increases demand by 20 units at each price. what is the new equilibrium price and quantity?

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